Factors Influencing ERP Selection

Considering the many different starting points, it is not always easy to find the right route for ERP selection. Among others, the choice of an approach is influenced by the following:

Complexity of the ERP project (company size, application area within the company, number of branches and users)

With increasing complexity of the ERP project, the investment as well as the risks increase. The more company departments and/or branches are supposed to work with the new ERP software the more versatile the requirements with regard to the new ERP solution get. Therefore, a stronger systematisation of ERP selection is recommendable with growing ERP project complexity.

Requirement specification is of central importance for coordination within the company. Less formal approaches usually suffice to successfully complete smaller ERP projects with less effort.

Investment Decision Protection

Insofar as relevant investment decisions make high demands on risk reduction because of formal reasons (e.g. given procedures) or because of problematic experience from previous projects, it is also recommendable to choose a systematic ERP selection approach. In this case, too, clear and binding requirement specification is of central importance, however more so for the coordination with the ERP vendor as well as for the binding specification of the scope of services in the ERP software contract.

Degree of "Politicisation" of the ERP software project

Many projects are marked by very different, sometimes even contrary notions about the suitable ERP software because they involve several departments or branches. The more rigid the front-line becomes the more "political" issues enter the discussions around the ERP software investment. Here, it is recommendable to choose a clearly defined and traceable method for ERP selection in order to reach a (compromise) decision by consensus.

Priority and Responsibility for the ERP software project (management committment, instrumentation and basis of the project team)

In ERP projects which are delegated to single departments, a broader basis for the project within the company can be created by a higher formalisation of the procedure. At the same time the necessary decisions on the management level can be integrated by way of adequate milestones. The fact that a systematic procedure necessitates a minimum degree of participation of all relevant company areas and thus corresponding personnel capacities, however, opposes this approach. In ERP software projects with a low priority resp. lacking management committment, a systematic ERP software selection often is not feasible.

Decision Scope for the investment decision (IT strategy, budget etc.)

If the scope of the ERP selection project is extremely limited by budget and/or IT strategy issues, the relevance of ERP market sounding and tendering is often minimised. In such cases, it is at most possible to consider whether the specification of requirements is sensible in terms of the contract negotiations resp. the final agreement.

Experience in ERP selection projects

Due to the fact that ERP selection projects with their investment cycles of about 10 years seldom form part of a company’s daily business, there is often a lack of concrete experience in handling such projects.

This is especially true when an extensive ERP software is to be selected and implemented for the first time. When there is uncertainty in this respect, a systematic ERP selection approach, which serves as a stabilising guideline for the project is recommendable. This is even true for smaller projects, there, however, the expense should be limited by suitable detailing.

Alternatively, the ERP selection project could be handed to a specialised consulting firm. From them, the user can expect intimate knowledge of the ERP software market as well as efficient and safe management of the ERP selection project. Here, it is commendable to ask for up-to-date references to ensure the consultants‘ competences in this field.

A look at the results of the reference projects also serves to make sure that the consultant is not associated with one or several ERP software vendors.

Conclusion

The aspects listed above show that there is no „high road“ of ERP software selection which is similarly feasible for every company. There are many routes that can be followed in order to achieve the objectives of ERP selection. In the end, the concrete shaping of ERP selection must always be set within the tension field of investment protection and necessary expense for selection safety.

However, the „balance cover“ should not be made too tight. Great expenses, for example, are often used as an excuse for dispensing with clear requirement specification. This is not only risky: the ERP vendor needs to know the company’s requirements anyway, at the latest when implementing the software. Insofar, it is always necessary to specify the requirements.

Similar arguments can be found with regard to the commissioning of a consultant for ERP selection: Consulting services use-up part of the budget. In the case of systematic ERP software selection, however, a consultant should be able to reduce the - usually underestimated - internal costs significantly. In the face of high competitive pressure on the ERP software market a specialised consultant also often manages to negotiate very good prices. Therefore, the investment in consulting usually quickly amortises.